There are two retirement systems for federal employees in the civil service: the Federal Employees’ Retirement System (FERS), and the grandfathered Civil Service Retirement System (CSRS). Depending on when your service as a federal employee began, you may be covered by one of these two retirement systems.
CSRS is the older of the two and is a long-time program of the U.S. Government. In fact, CSRS is actually older than the Social Security program.
Civil Service Retirement System (CSRS)
CSRS became effective on August 1, 1920. If you are a federal employee who was hired before January 1, 1984, chances are that you are probably “grandfathered” into CSRS coverage.
CSRS operates on a defined-benefit, contributory framework, according to the Office of Personnel Management. It’s different from FERS insofar as your retirement benefits are more definitive in what you will receive (ex: your basic annuity paying a defined income – more on that in a bit).
CSRS Retirement Benefits
When they are part of CSRS, federal employees will receive a basic annuity. Generally speaking, the accumulation of this annuity benefit will be a good deal larger than what you will see with the basic annuity benefit of FERS.
Under CSRS, a portion of your base pay goes towards your annuity benefit. You may opt to contribute 7%-8% of your pay, and your agency of employment then matches those contributions.
What if you want to save more for retirement? You may also contribute 10% of your basic pay toward a voluntary contribution account. For an alternative, part of your pay can be contributed toward the Thrift Savings Plan Voluntary Contribution Plan. A combination of these two options is also permitted.
When you contribute to the TSP as a CSRS participating employee, your TSP contributions will be tax-deferred. In other words, you can save money on a tax-delayed basis until you take money from the account, which is typically for retirement withdrawals. Note, however, that the U.S. Government won’t match your TSP contributions.
Under CSRS, you typically won’t be responsible for any Social Security OASDI tax. However, you are generally required to pay Medicare tax.
When Are You Eligible to Retire Under CSRS?
CSRS comes with its own requirements for eligibility for retirement. That being said, CSRS is unique in the category of benefits that can be received. These categories include:
- Special/early optional
- Special provision retirement
- Discontinued service
Each category of benefits has its own unique rules. On the whole, your eligibility requirements will encompass:
- Your age
- How many total years of creditable service you have
- The type of retirement that you will opt for
- Whether or not you have reached the minimum retirement age for your agency
- If you have satisfied other unique age-based rules (should this apply)
Used sick leave, unused sick leave, and differences in civilian versus service as part of the uniformed services, may impact how years of creditable service are calculated.
Check with your federal employee benefits counselor for more information and for questions surrounding your personal situation.
How Much Will Your CSRS Retirement Benefits Give You?
Remember, CSRS is a “grandfathered” system. As a result, the answer to this question will be based on your employment history. Your federal benefits guide can walk you through steps to calculate your benefits projections. Feel free to ask for a personal benefits analysis which also includes these computations.
Nevertheless, here are some general guidelines that you can use. The basic annuity is based on your length of service and your “High-3” average salary. The High-3 refers to the highest average basic pay that you earned during three consecutive years of service.
Speaking at a high level, the CSRS annuity formula for calculations is:
- First 5 years of service → 1.5% of high-3 average salary for each year
- Second 5 years of service → First 5-year benchmark + 1.75% of high-3 average salary for each year
- For all years of service over 10 → First two benchmarks above + 2% of high-3 average salary for each year.
The maximum benefit that you may receive is 80% of the high-3 average salary, plus credit for sick leave. However, your annuity benefit can be made smaller under certain conditions or situations.
In retirement, payments from your annuity benefit will be in fixed-dollar amounts. Over time, your annuity payments may have cost of living adjustments. These adjustments are intended to help your income keep up with inflation.
Ready for Personal CSRS Retirement Benefits Guidance?
As a CSRS employee, you may have unique benefits circumstances, especially if you have a complicated work history. Should you have any questions or be ready for personal guidance in walking through your benefits, we may be able to serve you.
Contact us today or request your own, complimentary federal employee benefits analysis to get started.